Multinational companies such as Google and Apple will have another way of lowering their taxes in Australia under controversial new tax breaks on patents being pushed by big business, an advocacy group has warned.

Australian tax authorities may be facing another tax loophole readily able to be exploited by large multinationals if Australia introduces 'patent box' legislation similar to that in place in the UK. Photo: Michel O'Sullivan

Multinational corporations have been lobbying the Federal government to introduce UK-style 'patent box' rules in Australia, saying they would strengthen the economy by keeping more companies in Australia.

But Tax advocacy group the Tax Justice Network has urged Canberra to resist the calls, saying the patent box rules introduced in the UK last year have created a new way for large businesses to avoid tax in the countries in which they operate.

''It would be contrary to the aims of [the OECD's profit shifting] action plan for Australia to adopt a harmful tax practice like a patent box arrangement,'' it said in a letter to the Treasurer last month.

It is distinct from tax reductions for research and development because it applies to patents already in use.

This means that a company, which has developed new technology overseas, can register its patent in the UK and dodge tax in the country in which the technology was developed.

Cochlear chief financial officer Neville Mitchell told Fairfax Media in March that the tax breaks would be particularly beneficial for the manufacturing industry.

''If you're all in the same area and work in the same areas, there is a huge advantage," he said. "But it is when you start getting distortions [due to tax incentives], which then encourage production to move."

But the Uniting Church's justice and international mission, which advocates alongside the Tax Justice Network, said in a letter to its members that it would create a race to the bottom, with governments seeking to undercut each other with lower and lower taxes.